The Vampire Economy

Chapter XVI

BUREAUCRACY IN CONTROL

“They do no work which adds goods or social services to
the market. Their job is to hold their job. The rest of the
community finds itself serving as the hardworking host
upon which the bureaucratic clique is feeding and fattening.”

THE capitalist in Germany is confused. The fascist State has, it is true, saved many private concerns from bankruptcy. Under the totalitarian regime, business has been freed from trade-unionism and strikes, and has therefore been able to depress wages and lengthen working hours at will while huge investments in armaments have resulted in prosperity for many enterprises. Nevertheless, most German businessmen insist that they have lost more under Nazism than have the workers.

The subservience of businessmen to the Party, the devious dealings and precarious existence which they suffer at the hands of the State, the complete loss of that independence which characterizes capitalist ventures in a non-totalitarian economy have proved a special disappointment to those who helped to finance the Nazi party before it came to power. It was their hope that the Nazi party would serve as their tool. Especially was this the belief of the important industrialists who had feared the loss of their monopolies, and of the big agrarians who could not survive the crisis without fresh State subsidies. Both eagerly sought political power in order to safeguard their positions—not merely against social revolutionary forces, but also against business competitors who attacked their monopolist privileges. They invested huge amounts of money in the Nazis. They did this, or had to do it, on too large a scale. For the power they helped create all too soon became the master of its creators—“authoritarian,” independent of their will and regulation. Co-operation of the businessmen, big and small, with the State and Party bureaucracy is being enforced by those who now have political power, while those who command mere money power are forced to “co-operate” with the new government at the risk of their very existence. This co-operation entails generous spending and the greasing of official palms, but it does not in any way increase the businessman’s chance of regaining economic independence and freedom.

When Germany’s leading bankers and financiers met at the National Congress of their group association (Banken und Versicherungsanstalten) on October 21, 1938, they were addressed as follows by the Government’s spokesman, Secretary of State Rudolf Brinkmann, who after Schacht’s removal was to become Vice-President of the Reichsbank:

“Schenkendorff [a German poet at the time of Germany’s ‘War of Delivery’ from Napoleon’s rule] sang in 1813, a heroic period, his song ‘Freiheit, die ich meine …’ [My idea of freedom …] and I see you, grimly smiling, making comparisons and especially asking me where that freedom of business and of business activity is, of which I have spoken and which I so love …” 1

The bureaucracy of the Nazi State is a special phenomenon. It is like a huge and growing incubus living off the body politic and becoming more parasitic as it increases in size and numbers. Secretary of State Brinkmann has said:

“To be sure, the new State has had to establish an alarming number of economic administrative boards, and, certainly, many a decision which is made by the foreign exchange control boards, by the examination boards, by the supervisory boards, by the economic groups, by the finance authorities is bureaucratic, that is, it is born more of excessive desire for order and love for the letter of the law than of knowledge and understanding of actual business life. However, bureaucracy exists not only in the governmental division of our economic life. In large concerns many bureaucratic decisions are to be observed.… Cartels also are not always free from bureaucracy.…” 2

The bureaucracy of the totalitarian State is much more bureaucratic and top-heavy than was the bureaucracy of private cartels, concerns and trusts in pre-Hitler Germany. Yet these corporations had already violated the laws of free competition under liberal capitalism and had, therefore, paved the way for further suppression of the rights of the independent entrepreneur.

This development did not originate in the minds of a few men who were especially unscrupulous. It was a development which grew out of a certain stage of the competitive struggle. Curious as it may seem, large concerns, trusts and cartels had abolished free competition in the name of free competition, and in the name of the rights of the independent entrepreneur who was typical of an earlier stage of liberal capitalism. Paradoxically, those entrepreneurs who did not attain a monopolistic position and who had to compete with each other in the open market, often, under the Weimar regime, asked State help or interference against “free,” that is, ruinous competition. Such a policy leads to a state of affairs where the State becomes a superpower, restricting and reducing the rights of all businessmen, granting privileges to a few concerns and trusts which are closely connected with the State bureaucracy and with the armament business and transforming private monopolies into State-protected monopolies.

The State dictates to the individual businessman how he must act in order that his activities may best serve the “national interest.”

A word must be said here about the character of the “common” or “national” interest.

The government of a totalitarian State might claim that only the strong arm of the State can prevent the individual businessman from looking after his private interests at the expense of society. The possibility of such a clash between individual and “common” interests certainly exists. A stubborn defender of a liberal economy—free competition—might deny the possibility of such a clash if there were such a thing as a “pure” competitive economy. But only if individual and social interests were identical would there be no need for laws and rules to regulate property rights and business life.

The term “common” or “national” interest is an abstraction, a conception which exists as a result of certain common interests or peculiarities of a stratum of citizens whose welfare is conceived of, under a totalitarian regime, as synonymous with the welfare of the State. These citizens, however, have private or individual interests which they may try to satisfy at the expense of members of their own class or group. Such acts would very often threaten the social group while enriching the individual.

This is particularly obvious in emergency situations—famine, earthquakes, war—when the reckless pursuit of private interests might endanger the whole social system. The State must then step in to discipline the individual miscreant “in the common interest,” that is, in defense of the whole social system.

Industrialists who are members of cartels or syndicates may be confronted by such clashes between individual and common or group interests. There are always firms which try to obtain special privileges for themselves at the expense of the whole group or “group community.” The clash between such private and group interests becomes dangerous when market conditions turn critical. Then common interests make it more necessary that a cartel or syndicate restrict individual business activities effectively. Under just such critical conditions, however, it becomes more tempting for independent enterprises to strengthen their position, their share in production and sales, at the expense of the other group members. The same holds true for the whole of society as long as it is based on a competitive economy. For competition implies the right of every individual to advance his own private interests as much as possible. The clash, however, between these individual or private interests and the social or group interests may be lessened by laws, decrees, and government measures, which restrict and diminish the individual rights.

The establishment of central authorities which control and restrict private business activities is a necessary consequence of this need for regulation. The growth of the central authorities promotes the formation of a powerful administration which becomes so strong that those who are in control of it easily become a quasiindependent power. Such a development is inevitable in a totalitarian State with a one-party dictatorship where the Party bureaucracy penetrates all government offices and grows to gigantic dimensions.

The new State bureaucracy compels the businessman to conform to restrictions and rules which conflict with the essential functions and rights of an independent capitalist. State officials may violate the sanctity of private property. This even becomes their duty if the businessman fails to conform to suggestions or orders of the State bureaucracy or shows insufficient devotion to the Party or to the leader.

The businessman is still “free” and “independent”—“free” in that he has no pension rights, “independent” in that he may risk losing his capital and economic status.

As a rule, a fascist government does not free the private businessman from the risk of losing his capital or from the burden of managerial activities. It does forbid him to increase or reduce production merely according to his private interests. The State orders private capital to produce and does not itself function as a producer. Insofar as the State owns enterprises which participate in production, this can be regarded as an exception rather than as the general rule.

The fascist State does not merely grant the private entrepreneur the right to produce for the market, but insists on production as a duty which must be fulfilled even though there be no profit. The businessman cannot close down his factory or shop because he finds it unprofitable. To do this requires a special permit issued by the authorities.

According to Dr. Brinkmann, the fascist State has “proclaimed the right to work and ownership of private property” as rights of the citizen. But “private property” in turn imposes the obligation to make good the “right to work.” This claim is not advanced because the State is sentimental about workers who lose their jobs, but because any considerable decline in employment would endanger the existence of the inflated State bureaucracy and the progress of rearmament.

The totalitarian State bureaucracy cannot tolerate another industrial crisis, leading to a serious decline in production, without risking a serious crisis for the whole regime. In Italy as well as in Germany the totalitarian State is the biggest consumer. Its demands exceed 50 per cent of the total production. A decline of production by only one-third would mean that the State would take 75 per cent of the total production, leaving only 25 per cent for the private citizens who are neither State-employed nor receive a State income. This would entail such an increase in direct and indirect taxation as to render private business completely unprofitable. The State bureaucracy would have to resort to further measures of coercion in order to maintain the industrial and social system. Under such conditions, the State itself might be compelled to operate industrial enterprises and thereby abolish the system of private enterprise. But this would immediately lead to a further growth of unproductive bureaucracy and an enlarged administrative apparatus, without inspiring workers or managements to increased production. The stimulus which still remains for workers and management to increase production would be absent. In its place would be even more naked force and fear. Voluntary co-operation could be achieved only if those who are engaged in production would receive higher incomes and more personal liberty.

The Nazi government has expressly threatened the private entrepreneur with increased State coercion and reduction of personal rights and liberties unless he fulfills adequately the “duty to produce” according to the State’s demands. The threat is implicit in the following “pep talk” of a high Nazi leader to German businessmen:

“Acknowledge frankly, without any reservations, your obligation to produce, and subscribe completely to the principle of unfalsified competition on a performance basis. If you do not do this, the strong State in which you share will no longer be in a position to allow business the wide field of free activity it now enjoys.” 3

Like schoolboys, Nazi Germany’s big bankers and industrialists had to listen to and applaud the State Secretary of the Ministry of Economics—formerly a Reichsbank employee of minor importance—who raised his finger warningly to Germany’s biggest private entrepreneurs and threatened: “Either you do what we tell you and satisfy our demands, or we shall take away the ‘freedom’ still left you!” Dr. Schacht emphasized frequently the conception that the State restricted private business activities only as an emergency and temporary measure. He clung to the idea, which has become old-fashioned under a totalitarian regime and is officially regarded as a heritage of “reactionary conservatives,” that the State should serve the interests of private business and protect its property rights. The Party leaders, on the contrary, insisted that the main function of private business is to serve the interests of the State—the individual exists for the State, not the State for the individual.

The Nazi regime maintains that private property is a basic principle of society, but in practice it controls and regulates the use of such property. This was not what the capitalist who favored the Nazi party during the 1931-32 depression had wanted. He merely wanted the State to find a way out for him. He felt he could no longer survive under the old competitive conditions. On one hand, his reserves were shrinking; on the other, he was the target of the labor movement. But the Fuehrer whom he then acclaimed as his savior has become the leader of an authoritarian State and Party bureaucracy. This bureaucracy regulates and controls the struggle for survival of private enterprise. Formerly the competitive struggle of business interests decided who would bear the inevitable capital losses during a crisis. Today it is the State bureaucracy which dictates who is to be eliminated from business. A private enterprise can survive only to the extent to which it has closer and better relations with the State bureaucracy than its competitors.

The greater the economic difficulties, the more the individual businessman fears that he will be sacrificed by the authoritarian regime “in the interest of the State.”

Therefore the dictatorship of the State bureaucracy becomes increasingly a dictatorship over the capitalist entrepreneurs, the small as well as the big businessmen, the shopkeepers as well as the great corporations.

Such conditions strengthen the independent power of the State bureaucracy so that it can become—and to a certain extent already has become—a. dictatorship which defends its own selfish interests at the expense of all classes, not excepting the private capitalists.

The selfish interests of the State bureaucracy are of an economic as well as of a political nature. When Dr. Schacht was still President of the Reichsbank and a powerful figure in Nazi Germany, he suggested curtailing the State bureaucracy and the expenses of the administration so as to reduce the weight of taxation, thereby helping the businessman. Dr. Schacht was told by the Party leaders that the maintenance of the Party and the bureaucratic administrative machine came ahead of the interests of the business community, which is allowed to exist only in order to pay its tribute to the State.

This tribute which private citizens have to pay to the totalitarian State might be bearable during prosperity when private business is making large profits and can earn an adequate income even in the face of increased taxation. However, when no such prosperity exists and depression wipes out private profits, then the weight of increased taxation and the financial demands of the State bureaucracy mean an increase in overhead for private enterprise, intensifying and lengthening the depression.

The totalitarian State cannot give heed to such contingencies. It cannot adapt its budget to the business cycle. It might perhaps cut unemployment relief, but the expenses for the maintenance of the State bureaucracy itself, as well as for armaments, cannot be reduced at will.

As the State takes on new and wider functions, it breeds an army of officeholders to take care of them. The entrepreneur finds that almost daily new State committees are created to pre-empt the functions of private business. Committees for Accounting, Supervisory Boards, Raw Material Purchase and Distribution Offices, Organizations for Preparation of War Production in Peace Industries, Labor Front Secretariats, Investment Control Boards—these and countless other State committees are manned by Nazi officials who are independent of private business and responsible to no one but the Fuehrer. And under each Nazi leader there are scores of subleaders.

The authoritarian State breeds irresponsibility on the part of this ever-growing and legally privileged group. Their position is secure—unless they are purged by their own friends, often as a result of rivalries—whereas the general economy is insecure. They do no work which adds goods or social services to the market. Their job is: to hold their job. The rest of the community finds itself serving as the hardworking host upon which the bureaucratic clique is feeding and fattening.

This does not yet prove that the ruling Party or the totalitarian regime has purposely betrayed its former sponsors. Increased State interference and the restriction of rights imposed even on big industrialists might be taken to show that the State has been compelling the individual businessman or industrialist to sacrifice materially and personally for the larger State or social group interests. But the fact is that the fascist State bureaucracy has steadily gained strength as the internal economy has weakened, and it now operates as a sprawling parasitic agency, identifying its own narrow bureaucratic interests with the general interests of society.

The Nazi party has warned the private entrepreneur that he must completely subordinate his private interests to the “public weal.” “The principle of primacy of public weal means also that the possibility of following personal interest ends where personal interest clashes with justified interests of others and thus threatens to plunge the whole system into conflict. These limits are pointed out to the individual, in some cases by business ethics and in some cases by State order.” 4

This development has fundamentally changed the social position of the businessman. He no longer belongs to the top stratum of society even if he is a big businessman. His social position is beneath that of the leading members of the State bureaucracy or of the Army. This is reflected in his steady fear of the State bureaucracy. He is no longer a law-abiding citizen who sticks to the letter of the law because he believes the law is good and court decisions usually just. He fears the power of the State bureaucrats and he knows all too well their contempt for the ideas which he has cherished. He no longer believes that the sacredness of private property will be respected, for he has experienced too often the arbitrary curtailment of property rights. He knows too intimately that State bureaucrats use their absolute power to enrich themselves at the expense of other less powerful citizens. There may be less likelihood of losing his capital through “ruinous competition,” but this has been more than offset by new business risks. Previously, when he failed in a competitive struggle, he inclined to blame himself for his failure, but not the system. If he fails under the totalitarian State, he blames the system—and his inability to win the favor of an influential State bureaucrat.

Under such a system two categories of businessmen can be distinguished: those who are willing to take risks and those who are not. Not that the former seek new fields of investment or new possibilities of production. They devote their energies to circumventing bureaucratic decisions and to cunning violations of the law. They do not lose the respect of their competitors; on the contrary, they are regarded almost as heroes who risk their existence and their lives in the struggle against the State bureaucracy.

They may reduce their risks by paying an insurance premium—bribing State bureaucrats and paying higher contributions to the Party treasury.

Those who do not wish to take chances spend their energy worrying lest they violate some decree or law, and behave timorously toward any State bureaucrat.

A big German manufacturer was asked by the author:

“How has the spirit of the businessman changed under the Nazi regime?”

The laconic answer was:

“The German businessman riecht nach Angstschweiss (sweats with fear). He does not know whether he has broken some law, whether and when he will be caught. He wakes up in the morning dreaming of an investigation by some State bureaucrat who has discovered some irregularity of which he, the businessman, knew or did not know. He enters his office fearing that he will find the announcement of a new decree which curbs his business, or that the condition of State finances will lead to some new measure of expropriation. When the office door opens he expects a tax official who will investigate his business affairs for many years back until he finds some ‘irregularity.’ You may think this anxiety unreasonable. But unfortunately I cannot help fearing that I will experience tomorrow what is happening to others today.”

Fascism has deprived the businessman of his self-confidence and feeling of economic security, even if he still is a well-to-do capitalist. The totalitarian regime has annihilated the most important conservative force of capitalism, the belief that private property ought to be a sacred right of every citizen and that the private property of every citizen ought to be protected. Respect for private property has penetrated the spirit of the people in all capitalist countries. It is the strongest bulwark of capitalism. Fascism has succeeded in destroying this conservative force—without having created a new and better social principle. For it still relies on private property and on private production. People still have to work for money and have to live on money incomes. Possession of capital still provides income. But this income is largely at the mercy of State bureaucrats and Party officials.